New York’s highest court has agreed to rehear its June decision that held that a liability insurer found to have “breached its duty to defend…may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him.” The case, K2 Inv. Group, et al. v. Am. Guar. & Liab. Ins. Co., No 106 (June 11, 2013), which we first reported on here had held that “…an insurance company that has disclaimed its duty to defend ‘may litigate only the validity of its disclaimer.’ If the disclaimer is found bad, the insurance company must indemnify its insured for the resulting judgment, even if policy exclusions would otherwise have negated the duty to indemnify.”

Following the court’s initial decision on June 11, 2013, the insurer moved for a rehearing, arguing that the court misapprehended and overlooked two critical New York cases, Lang v. Hanover Ins. Co., 3 N.Y.3d 350 (2004) and Servidone Const. Corp. v. Security Ins. Co., 64 N.Y.2d 419 (1985). An amicus brief was also filed by the Complex Insurance Claims Litigation Association and the American Insurance Association, indicating that there is considerable interest in the decision from players in the insurance market. Earlier this week the motion for a rehearing was granted. Stay tuned for further updates as to whether or not the court’s initial decision will stand.